Sri Lanka looks at stop-gap financing to settle debt in 2019
ECONOMYNEXT – Sri Lanka’s will look to alternative sources to re-finance maturing debt of over four billion US dollars in 2019, as yields in capital markets have spiked amid political uncertainty and a credit downgrade, an official said.
Lalith Samarakoon, who heads an economic council convened by President Maithripala Sirisena said the most important concern were sovereign bonds. There were about 5.4 billion in forex debt, including about a billion US dollars of domestic dollar debt, he said.
Sri Lanka has to repay a billion US dollar sovereign bond in January and a 500 million bond in April.
The central bank has said it plans to raise 750 million to a 1,000 million through state-run Bank of Ceylon, People’s Bank and National Savings Bank and there was 680 million dollars in a Treasury account from money paid by China for Hambantota Port.
"Then the others are project loans," he told reporters in Colombo. "As you know project loans are not only outflows, but we receive bilateral and multilateral sources, in a given year we receive about 600 million dollars.
"In total, at the end of the day we might have to finance about two billion dollars externally during 2019, if we are going to markets."
Earlier this week Moody’s Investors Services downgraded Sri Lanka’s speculative B1 credit to B2.
He said the rating downgrade by Moody’s and global conditions may have pushed up yields for Sri Lanka’s debt in capital markets, and it was prudent to find lower cost funds.
"That is why the central bank is looking to develop Swap arrangements, with our friendly countries," he said.
"That is why we have already talked about the need for establishing government-to-government, high level emergency sources of funding – what they call stop-gap funding. All these options are available.
"It is after exhausting those options that we might have to go to markets to raise some amount of money. But that can wait towards the latter part of the year."
Sri Lanka’s central bank Governor Indrajit Coomaraswamy had said that Sri Lanka was in talks for swap arrangements with Qatar and China. There were also plans to upsize a syndicated loan from China to 1.5 billion US dollars.
Samarakoon said a billion US dollars of Sri Lanka Development Bonds issued in the local market which could be "very easily re-financed".
Sri Lanka is also facing outflows from about 1.2 billion US dollars of rupee bonds held by foreigners, which are being sold down.
Sri Lanka’s central bank is also intervening in forex markets and printing money to keep rates down, to maintain an unstable soft-peg with the US dollar, triggering reserve losses. (Colombo/Nov22/2018)